NEW DELHI (AP) 鈥� India and the European Union reached Tuesday that could affect as many as 2 billion people after nearly two decades of negotiations.
The accord, which the head of the EU’s executive branch described as the 鈥渕other of all deals,” will see free trade on almost all goods between the EU鈥檚 27 members and India, covering everything from textiles to medicines, and bringing down high import taxes for European wine and cars. It will likely take several months before the agreement takes effect.
The deal between two of the world’s biggest markets comes as Washington targets both and the with steep import tariffs, disrupting established trade flows and pushing major economies to seek alternate partnerships.
鈥淭his agreement will bring major opportunities for the people of India and Europe,鈥� Indian Prime Minister said in a virtual address to an energy conference. 鈥淚t represents 25% of the global GDP and one-third of global trade.鈥�
India and the EU also agreed on a framework for deeper defense and security cooperation, and a separate pact aimed at easing mobility for skilled workers and students, signaling that their partnership extends beyond commerce.
U.S. pressure propels deal
The negotiations for the India-EU deal got a new impetus after U.S. President Donald Trump鈥檚 strong-arm trade tactics, including threatening his European allies with punitive tariffs over their objections to Trump’s threats to .
Modi, speaking at a joint news conference in New Delhi with European Commission President and European Council President , said that the partnership with the EU 鈥渨ill strengthen stability in the international system鈥� at a time of 鈥漷urmoil in the global order.鈥�
鈥淓urope and India are making history today. We have concluded the mother of all deals,鈥� von der Leyen posted on X.
In a speech later, she said that the accord was a tale of 鈥渢wo giants鈥� who chose partnership “in a true win-win fashion.鈥� She also said that it sends “a strong message that cooperation is the best answer to global challenges.鈥�
The deal is expected to further integrate supply chains and strengthen joint manufacturing power between the two economies. It will also cut up to 4 billion euros ($4.7 billion) in annual tariffs for exporters and create jobs for millions of workers in India and Europe.
Easing regulation
A formal signing of the deal could come later this year after officials go through the legal details of the text and the European Parliament ratifies it. India’s trade minister, Piyush Goyal, said that he expected the deal to take effect by the end of the year.
India is expected to reduce or eliminate tariffs for 96.6% of EU exports, while Brussels will reciprocate with similar reductions in phases that eventually cover nearly 99% of India鈥檚 shipments by trade value, according to statements from both sides.
India’s sectors poised to gain from the deal include textiles, apparel, engineering goods, and leather, handicraft, footwear and marine products, while the EU鈥檚 gains will be in wine, automobiles, chemicals and pharmaceuticals, among others.
A quota system for automobiles, wines and whisky has been agreed upon, bringing down steep duties.
The European Commission said that tariffs charged by India on EU-made cars will gradually go down from 110% to as low as 10%, while they will be fully abolished for car parts after five to 10 years. Tariffs ranging up to 44% on machinery, 22% on chemicals and 11% on pharmaceuticals will also be mostly eliminated.
On European wine, the tariffs in India would come down from 150% to 20% for premium wines.
New Delhi has excluded dairy products such as milk and cheese from the deal, along with cereals, citing 鈥渄omestic sensitivities鈥� about those products. For its part, the EU won鈥檛 allow concessional tariffs on imports of Indian sugar, meat, poultry and beef products, Indian Trade Ministry officials said.
Offsetting U.S. tariffs impact
India is looking to diversify its export destinations as part of a strategy to offset the impact of , including an extra 25% levy on Indian goods for its unabated purchases of discounted Russian oil, bringing the combined tariffs imposed by the United States on its Asian ally to 50%.
For the EU, the deal offers the bloc expanded access to one of the world鈥檚 fastest-growing major economies, and helps European exporters and investors reduce their reliance on more volatile markets.
鈥淭his is the most comprehensive trade deal India has ever signed, which gives European companies a first mover advantage into this market and gives them a strategic upper hand that other players do not,鈥� said Garima Mohan, a senior fellow at the German Marshall Fund.
Trade between India and EU stood at $136.5 billion in 2024 to 2025. The two sides hope to increase that to about $200 billion by 2030, Indian officials said.
鈥淯ltimately, the agreement is about creating a stable commercial corridor between two major markets at a time the global trading system is fragmenting,鈥� Indian trade analyst Ajay Srivastava said.
The EU is still reeling from the aggressive approach of its once-stalwart ally across the Atlantic. There鈥檚 a widespread sense of betrayal across the bloc from Trump鈥檚 onslaught of higher tariffs, and belligerence over Greenland, a semiautonomous territory of EU member Denmark.
Brussels has accelerated its outreach to markets around the world. Over the past year, von der Leyen has signed deals with Japan, Indonesia, Mexico and South America under the catchphrase 鈥渟trategic autonomy,鈥� which in practice is akin to decoupling from a U.S. seen by most European leaders as erratic.
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Sam McNeil reported from Brussels.
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